BayernLB

15-Nov-2018

BayernLB posts nine-month profit before taxes of EUR 716 million

  • All customer serving business segments make positive contribution once again
  • Earnings boosted by non-recurring income and positive net risk provisions of EUR 122 million
  • Net interest income rises 2.6 percent buoyed by positive performance at DKB
  • NPL ratio reaches a new best at EUR 1.2 percent
  • Very solid capital base: CET1 ratio of 14.7 percent
  • Return on equity (RoE) at 10.5 percent
  • Cost/income ratio (CIR) remains in the target range at 58.7 percent
  • Previous forecast for the year will be exceeded

Munich - BayernLB has posted profit before taxes of EUR 716 million for the first nine months of 2018, far exceeding the figure for the year-before period (9M 2017: EUR 554 million). Consolidated profit (after taxes) climbed to EUR 564 million (9M 2017: EUR 433 million), with all the operating segments making a positive contribution. The gain in earnings is also due to exceptional items.

“We performed well in the first three quarters of 2018. The fact that all the customer-serving segments played their part in this demonstrates once again how sustainable our customer base is”, commented BayernLB CEO Johannes-Jörg Riegler on the nine-month results.

BayernLB Group’s net interest income rose 2.6 percent on the year-before period to EUR 1,282 million (9M 2017: EUR 1,250 million) thanks to good performance at DKB. Net commission income was on par with the year-before period at EUR 192 million (9M 2017: EUR 197 million).

Risk provisions in the credit business at BayernLB were a positive EUR 122 million (9M 2017: EUR 96 million). High portfolio quality, the stable economic environment in the Bank’s core markets and recoveries on written down receivables were contributory factors. The NPL ratio, which illustrates the share of non-performing loans as a proportion of the total lending volume, reached a new best at 1.2 percent.

Gains or losses on fair value measurement came to EUR 166 million (9M 2017: EUR 196 million). The decline was partly the result of shifts between the gains or losses on fair value measurement and gains or losses on hedge ac-counting items. Gains or losses on financial investments, which mainly contained proceeds from the sale of securities, climbed to EUR 37 million (9M 2017: EUR 19 million).

Administrative expenses were slightly up on the year-before period at EUR 982 million (9M 2017: EUR 953 million). However, the higher costs for major regulatory projects, strategic investments in sales and Group-wide digitalisation initiatives remained in line with forecasts.

BayernLB’s total assets climbed 6.0 percent on the end of 2017 to EUR 227.4 billion (31 December 2017: EUR 214.5 billion). The growth was due to an in-crease in money market and lending transactions. This also pushed up risk-weighted assets (RWAs) to EUR 64.7 billion (31 December 2017: EUR 61.4 billion).

BayernLB's capital adequacy remains very solid, with CET1 capital (fully load-ed) amounting to EUR 9.5 billion (31 December 2017: EUR 9.4 billion) and a fully loaded CET1 ratio of 14.7 percent (31 December 2017: 15.3 percent).

BayernLB’s return on equity (RoE) rose to 10.5 percent (9M 2017: 8.4 percent). In addition, the Bank’s cost/income ratio (CIR) also improved to 58.7 percent (9M 2017: 63.5 percent).


Earnings in the operating business segments

Corporates & Mittelstand

Operating performance in Corporates & Mittelstand remained stable despite the very challenging market environment. Profit before taxes stood at EUR 222 million, almost identical to the year-before period figure (9M 2017: EUR 223 million). Net interest income fell to EUR 199 million (9M 2017: EUR 214 million) as a result of stiff competition in the market and net commission income climbed to EUR 80 million (9M 2017: EUR 77 million). Earnings continued to be pushed up by high releases in risk provisions and recoveries on written down receivables. On balance, risk provisions in the segment were a positive EUR 142 million (9M 2017: EUR 141 million). Customer business with Financial Markets’ products also remained largely stable.

Real Estate & Savings Banks/Association

In Real Estate & Savings Banks/Association, profit before taxes surged to EUR 208 million (9M 2017: EUR 139 million). Good new business in the Real Estate division was the primary driver of positive operating performance. Earnings from net interest and net commission income in the segment were slightly up on the year-before period at EUR 285 million (9M 2017: EUR 278 million). Earnings were also boosted by high proceeds from the sale of a restructuring exposure. BayernLabo, BayernLB’s development bank, posted stable profit before taxes of EUR 33 million.

Financial Markets

In Financial Markets, profit before taxes fell to EUR 30 million (9M 2017: EUR 109 million). Operating performance was stable but the segment’s earnings in the year-before period had benefited from high measurement gains. Income from Financial Markets products generated for the customer-serving segments was roughly on par with the year-before period, despite tough market conditions, and was reported under the segments concerned.

DKB

DKB continued to perform well, reporting a jump in profit before taxes to EUR 292 million (9M 2017: EUR 199 million). The increase was driven by higher net interest income, due partly to the persistently favourable funding structure, and risk provisions in the credit business, for which a much lower net addition of EUR -22 million was required than in the year-before period (9M 2017: EUR -83 million). DKB expanded its retail customer base to 3.9 mil-lion, thereby further consolidating its position as Germany’s second-largest online bank and one of the country’s market leaders in digital banking.

Outlook for full year 2018

Our previous forecast of profit before taxes in the mid-triple-digit millions is in line with operating earnings potential. We currently expect to beat the good figure for 2017, as a result of high one-off income and anticipated positive net risk provisions.

Additional details about the BayernLB Group's financial figures as at 30 September 2018 can be found in the supplemental presentation.